US judge rejects settlement involving American Express over 'burn after reading' emails

Wikimedia CommonsNEW YORK (Reuters) - A U.S. judge on Tuesday rejected a proposed class action settlement between American Express Co and merchants who sued the company over swipe fees, ruling that a lawyer for the merchants compromised the fairness of the agreement.

U.S. District Judge Nicholas Garaufis in Brooklyn, New York, ruled that lawyer Gary Friedman acted improperly by talking about the case and sharing confidential information with a friend who represented MasterCard Inc. in a parallel class action against MasterCard and Visa Inc.

Garaufis wrote that Friedman repeatedly violated court rules meant to protect confidential information and created a conflict of interest.

The violations were so blatant that in at least two emails, Friedman wrote to his friend, "burn after reading."

Garaufis ordered Friedman removed as co-lead counsel for the merchants and ordered a new round of written briefs to be filed in the case by Sept. 8.

Two lawyers who represent Friedman could not immediately be reached for comment.

The proposed antitrust settlement would have allowed merchants to impose a surcharge on American Express users, potentially treating those cardholders differently from other customers. Such settlements generally require court approval.

Merchants were not due to receive any money from the agreement, although Friedman and two other law firms that served as co-lead counsel were due to receive $75 million in fees.

American Express said in a statement it was disappointed in the ruling because it considered the settlement agreement fair. It added: "We believe we have strong defenses against the merchants' claims, and will continue to fight our case in court."

The case is In Re: American Express Anti-Steering Rules Antitrust Litigation, U.S. District Court for the Eastern District of New York, No. 1:11-md-2221.